Relevant and even prescient commentary on news, politics and the economy.

A Book Called “Eggshells”

Each morning, she awoke at 4:45 a.m., pulls on her blue janitor’s smock and heads over to the college to clean from 6 a.m. to 9:30 a.m. Then she returns home to take care of her 14-month-old daughter, Alice. The day she got the call over the summer telling her she had won a prize and Alice was being fussy.

“I’d been having a rough day — up early for my cleaning job, tearing home to mind the baby, baby wouldn’t nap and was making her feelings known,”

Caitriona Lally had written a book, a book called “Egg Shells.” As described to the Post,

“Eggshells’ is about a socially isolated misfit who walks around Dublin searching for patterns and meaning in graffiti or magical-sounding place names or small doors that could lead to another world.

I spent the guts of a year wandering around Dublin in 2011, the year I was unemployed. I had been laid off from my job in the recession and was walking the streets myself looking for ‘staff wanted’ signs, and came up with the idea of my character, Vivian, who’s just looking to belong, to connect with someone.”

This I can not describe better than she, having spent a year gaffing up trees in Wisconsin, cutting them down, and chipping the wood in a malfunctioning chipper which I had to clean the chute out by hand. I still have my fingers. For one year, I managed to keep home and family in a home until I found a better job.

Caitriona’s path to literary acclaim has been marked by plenty of rejection and job hopping.

Caitriona attended Trinity College Dublin as an undergraduate student and studied English. She worked as a custodian for the college when she was a student to offset expenses.

“I spent a couple of summers working as a cleaner in Trinity,” she wrote to The Post. “I spring-cleaned student residences after they vacated them, then worked as a chambermaid when guests came to stay in the college in the summer months. The spring cleaning was tough work — a year’s worth of grime doesn’t shift easily!”

Once Caitriona realized that she won the award and that it came with a 10,000 euro prize (about $11,500), she described it as “just pure magic.”

Caitriona hadn’t applied for the award; the prize committee selects the nominees. Winners over the years have become some of Ireland’s best-known writers, including Anne Enright and Frank McGuinness.

The benefactor of the prize is Peter Rooney, who took over from his uncle, Dan Rooney, former U.S. ambassador to Ireland and chairman of the Pittsburgh Steelers, who died last year.

Caitriona said her janitor job works for her schedule as a mother and is a great fit for writing. She’s finishing up her second novel, and she’s not planning on giving up her morning work.

The author who works as a janitor had won a prestigious literary prize from the university she cleans.

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The Future Isn’t What It Used to be But I will Alway Comment on Krugman

I try to avoid forcasting, but I confidently forecast that, in the future, I will continue to try and try to find cases on which I disagree with Paul Krugman.

In The Economic Future Isn’t What It Used to Be (Wonkish) Krugman notes that forecasts of potential output of the US and the EU are now far below what they were in 2008. He argues that this probably shows a genuine long run damaging effect of the great recession (following Ball,Fatas, & Summers (listed in alphabetical order)). Following Blanchard and Summers, he calls this hysteresis (introducing the word to economic was brilliant) . Finally he argues that this is immensely important, because if demand shortfalls cause permanent damage it it is much more important to fight them compared to say, inflation.

I agree, but I want to stress a point of partial disagreement.

Krugman notes the reported decline in estimates of potential output for given years (so the 2018 estimate of 2018 potential output is far below the estimate of 2018 potential output in 2008). He considers 3 cleverly named explanations of the pattern happenstance, hypochondria and hysteresis. The third is his favored hypothesis that most of the change is a true change in potential output due to slack demand.

Happenstance would be a coincidental exogenous decline in the rate of growth of potential output which happened, by pure coincidence, to occur at roughly the same time as the great recession. Krugman dismisses this (following others) by noting that the decline in estimated potential output is greater in countries who experienced more severe recessions. The happentance argument requires not one coincidence but dozens across countrie.

The hypochondria hypothesis is that potential output is what was forecast and actual output is far below potential output. Krugman argues against this by considering the simplest model of potential output which is output plus a constant times the unemployment rate (maybe minus that constant times a constant guess of the natural unemployment rate). This model is called an Okun’s law model. Like all sensible people, he assumes that official etimates of the natural unemployment rate are nonsense, but he notes that the actual unemployment rate in the Euro-zone is now 8.2%, shockingly high by US standard but lower than the average from 1990 through 2008. If one assumes that the Eurozone natural rate is actually 4%, then one concludes that potential output is higher than current output, and that potential output in the 90s was higher than then current output. This means that the change in potential output is not misseatimated and has, in fact, been extraordinarily small, and that forecasts of potential made in 2008 were too pessamistic to exactly the same degree as current forecast, so the change in the forecasts reflects a true change.

This would be convincing except for the facts that actual estimates of potential output are based on much fancier models, which are less robust that the super simple Okun’s law model, and that forecasts of potential output are based on a third model (that it it is standard to not evaluate the model used to estimate potential output by comparing out of sample forecasts to outcomes — the result of this standard exercise would be too humiliating).

ultra wonkery (which may be totally wrong) after the jump

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The Susan Collins Excuse

The Susan Collins Excuse

I listened very carefully to Senator Collins as she detailed her excuses for letting Brett Kavanaugh become a Supreme Court Justice. Two aspects of her speech were particularly absurd and kind of appalling. Her claims that Kavanaugh is a moderate akin to Justice Stevens were beyond absurd. The most appalling aspect of her speech was how she dismissed the claims that Kavanaugh sexually abused women in high school and/or college:

Some of the allegations levied against Judge Kavanaugh illustrate why the presumption of innocence is so important. I am thinking in particular not at the allegations raised by professor Ford, but of the allegations that when he was a teenager Judge Kavanaugh drugged multiple girls and used their weakened state to facility gang rape. This outlandish allegation was put forth without any credible supporting evidence and simply parroted public statements of others. That’s such an allegation can find its way into the Supreme Court confirmation process is a stark reminder about why the presumption of innocence is so ingrained in our a American consciousness. Mr. President, I listened carefully to Christine Blasey Ford’s testimony before the Judiciary Committee. I found her testimony to be sincere, painful, and compelling. I believe that she is a survivor of a sexual assault and that this trauma has upended her life.

She believes Dr. Ford but then she went on and on like a defense attorney why she did not believe her when she clearly said it was Kavanaugh. But the real stunner was when she said this:

I do not believe that the claims such as these need to be proved beyond a reasonable doubt. Nevertheless, fairness would dictate that the claims at least should meet a threshold of more likely than not as our standard. The facts presented do not mean that Professor Ford was not sexually assaulted that night or at some other time, but they do lead more to conclude that the allegations fail to meet the more likely than not standard.

I guess “the facts presented” is the key aspect as we know the FBI was not allowed to pursue corroborating evidence, which is why this episode is clearly absurd. But does Senator Collins truly grasp this more likely than not concept? I’m an economist not a lawyer but I have worked with tax attorneys and accountants on the transfer pricing aspects of tax provisions under FIN 48:

Under the Interpretation, absent the existence of a widely understood administrative practice and precedent of the taxing authority, an enterprise cannot recognize a tax benefit in its financial statements unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority, based solely on the technical merits of the associated tax position. In this evaluation, an enterprise must assume that the position (1) will be examined by a taxing authority that has full knowledge of all relevant information and (2) will be resolved in the court of last resort.

Let’s key in on “full knowledge of all relevant information”. I have seen multinationals trying to convince financial auditors not to impose tax reserves based on some suspect report that key intercompany prices are arm’s length and where material information was not disclosed. In my experience, the financial auditors would refuse to give FIN 48 clearance until this information was disclosed and properly evaluated. It is well known that the latest FBI inquiry literally ran away from material information that may have corroborated Dr. Ford’s testimony. So when Senator Collins raises this More Likely Than Not standard – she should know better given the fact relevant information was not properly explored. Nicole Belle makes a strong case that the Republicans even knew ahead of time that Dr. Ford’s allegations are true:

Don’t Kid Yourself. The GOP KNOWS Kavanaugh Tried To Rape Someone … The FBI notifies the White House of the letter to see if they want follow-up. The White House declines further investigation. But now they know. And now they pass it on to GOP operatives. Early August. So now, Kavanaugh, the FBI, the White House AND GOP operatives all know. BEFORE the hearing even begins. So now the PR campaign goes into overdrive.

Read the entire thing as it explains a lot of the Republican fake anger at Senator Feinstein, which was all a gigantic smoke screen to disguise the fact that the Republican operatives were doing all they could to demean Dr. Ford, pump up Kavanaugh, and evade any real investigation. Senator Collins little More Likely Than Not sort of puts this in the domain of civil litigation rather than criminal charges where the standard is:

preponderance of the evidence – n. the greater weight of the evidence required in a civil (non-criminal) lawsuit for the trier of fact (jury or judge without a jury) to decide in favor of one side or the other. This preponderance is based on the more convincing evidence and its probable truth or accuracy, and not on the amount of evidence. Thus, one clearly knowledgeable witness may provide a preponderance of evidence over a dozen witnesses with hazy testimony, or a signed agreement with definite terms may outweigh opinions or speculation about what the parties intended.

Suppose Dr. Ford chooses to file a civil lawsuit against Brett Kavanaugh and Mark Judge. What then? We would have actual discovery if this lawsuit is allowed. Then again I bet Kavanaugh would hire some slime ball lawyers to squash this lawsuit even if they had to take it to the Supreme Court where Justice Kavanaugh could file the fifth vote in favor of his own motion.

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Sour Grapes

As I write, Brett Kavanaugh is not yet a Supreme Court Justice. I assume he will be one soon. I am going to argue that this is the best of the bad possible outcomes.

Yes this is making the best of a bad situation and pathetic motivated reasoning. Yes Collins’s speech drove me into an almost insufferable panic and despair (don’t ask me ask, my soon to be ex-wife if I don’t get a hold of myself [by blogging]). Consider this post emergency marriage therapy (or my bothering you by my recognition of her 8th amendment rights).

First it is clear that a very large fraction of the US public believe that Kavanaugh is a criminal and think it is very wrong for him to serve on the Supreme Court. In polls this seems to be a plurality not an absolute majority.

Also, on Thursday, he demonstrated that he is a raging partisan who aims to use his robe to punish his political adversaries. I think this was already clear to anyone who paid attention, but it is now clear to many people who looked the other way. They include lifelong Republican Justice John Paul Stevens a retired justice who argued against confirmation of a new one. This is unprecedented. The ABA reopened their evaluation of Kavanaugh when it was too late to influence the Senate. I am pretty sure that is unprecedented too. 2,400 law professors signed a viral petition arguing against confirmation of someone who was likely to be incredibly powerful. I suspect this is unprecedented event 3.

This means that the perceived legitimacy of the Supreme Court is in great danger (as it was in 2000 and as it was when the Warren Court decided to take the Constitution seriously). I’d also say that Justice Kavanaugh will attract attention to the misdeeds (torts not crimes) undoubtably committed by Justice Thomas and his felonious denial of those facts under oath. He was never a legitimate Justice, and that will no longer be over looked.

5-4 decisions with Kavanaugh and Thomas in the majority will be perceived to be illigitimate by a very large fraction of the population (I guess eventually reaching a majority but maybe just a plurality). This is exactly what Chief Justice John Roberts fears most — and can prevent any time he wishes. 5-4 decisions with Kavanaugh in the minority will not destroy the perceived legitimacy of the Court or endanger the constitutional order. I hope Justice Roberts (who clearly votes based on the outcome he prefers and can rationalize anything) will act accordingly.

Also packing the court is a very extreme act which would definitely endanger the Republic. It was done — in the 1860s. The congress that changed the number of justices also impeached President Andrew Johnson and refused to seat representatives and senators elected in Confederate states. This followed the Civil War — after killing each other for 5 years Americans were prepared to change the number of justices if necessary.

It was threatened by F. Roosevelt leading to “a switch in time saves nine” a sudden shift from declaring the New Deal unconstitutional to accepting it, because the alternative was a packed court. I may have made a mistake above. I guess Roberts fears court packing even more than he fears perceived illigitimacy — the two are so closely linked it would be hard to tell even with ESP.

One point is that he can avoid both by voting with the Democrats.

Another is that desperate times call for desperate measures. Court packing is preferable to submission to an undemocratic oligarchy and armed revolution and the GOP may leave us only those three choices.

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“Lock Her Up!!!”

“Lock Her Up!!!”

For several years now we have all grown accustomed to the fact that President Trump likes to go to rallies of his supporters where they relentlessly chant the subject head of this post.  It has always referred to his opponent in the presidential election of 2016, the person who got about 3 million more votes than he did, even as he managed to win in the determining electoral college.  While I recognize that Hillary Clinton has many flaws, she has been investigated more times than I can count for many alleged offenses, some of which I suspect she is guilty of, even as some of them were pretty minor (see financial shenanigans back in Arkansas).  She also was subjected to many Congressional investigations by several committees for many alleged offenses, including her notorious getting emails in her home like her three predecessors did, although none of them were ever so investigated. She even had 8, really 8, investigations of her role in the Benghazi fiasco, these costing taxpayers many millions of dollars.  The final one involved her  sitting for 11 hours straight while a GOP led committee interrogated her, ending up with them looking like a bunch of exhausted foolish idiots while she looked  cool as a cucumber. The final bottom line is that none  of those investigations led to even an indictment for anything.

A peculiar sideshow on this is that among the more bizarre investigations of her, costing millions of US taxpayer dollars, was that in 1998 by the Starr group of the chance that she had been responsible for the death of Vincent Foster, who committed suicide on the GW Parkway.  The person advocating this investigation of a conspiracy theoty and engaging in it, only to find a big fat nothing, was none other than Brett Kavanaugh, apparently about to be confirmed to be the  next lifetime member of the US Supreme Court.

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Dumb and Dumber

Two bits of news from Twitter.

The GRU employed 305 morons who have been identified as GRU operatives, because they registered their cars at a GRU office address to intimidate the traffic police. In theory automombile registries are not available to the public. In Russia everything is available for a price.

Click the link and read the thread.

Yep they are a bunch of corrupt buffoons who probably didn’t manage anything except for hacking the DNC, John Podesta and Smartech. What is Smartech ?
It’s the internet company that the Bush administration used to evade the Presidential Records Act hiding 22,000,000 e-mails which should have been preserved (“but her e-mails”). Unlike Clinton.com, it definitely was hacked by the Russians . Projection it’s always projection. Always.

It was also used by Senator Graham whose sudden switch from Trump critic to Trump fan has lead many people to assume he is being blackmailed. It was also use by Senators Corker and Flake before their mysterious retirements (and Flake’s incomprehensible Kavanaugh related decisions — damn I was trying to not name he who can not be named).

Click this link. It’s just a thread on twitter, but it has links to sources. Also I knew many of the facts (from various sources some of them reliable) but didn’t know about Flake and Corker.

So the corrupt idiots seem to have managed to get kompromat on 3% of the US Senate — probably enough to decide who will be on the Supreme Court.

I have one question which I urgently want answered. Did Susan Collins use Smartech ? I won’t care in 100 minutes when she announces her final vote on Kavanaugh, but I want to know now.

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September jobs report: a mixed report with different implications in different timeframes

September jobs report: a mixed report with different implications in different timeframes

HEADLINES:

  • +134,000 jobs added
  • U3 unemployment rate declined -0.2% from 3.9% to 3.7%
  • U6 underemployment rate rose from 7.4% to 7.5%

Here are the headlines on wages and the broader measures of underemployment:

Wages and participation rates

  • Not in Labor Force, but Want a Job Now:  declined -152,000 from 5.379 million to 5.237 million
  • Part time for economic reasons: rose +263,000 from 4.379 million to 4.642 million
  • Employment/population ratio ages 25-54: unchanged at 79.3%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.07 from  $22.74 to $22.81, up +2.7% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  

  • Manufacturing jobs rose +18,000 for an average of +23,000/month in the past year vs. the last seven years of Obama’s presidency in which an average of 10,300 manufacturing jobs were added each month.
  • Coal mining jobs fell -300 for an average of -16/month vs. the last seven years of Obama’s presidency in which an average of -300 jobs were lost each month

July was revised upward by 18,000. August was also revised upward by 69,000, for a net change of 87,000.

 

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The simple Fed funds + payrolls leading indicator: autumn update

The simple Fed funds + payrolls leading indicator: autumn update

While we are waiting for tomorrow’s jobs report, let me update my alternative Fed funds + payrolls leading indicator for the economy, which I debuted earlier this year. This was the result of looking for an interest rate indicator that did not rely upon the yield curve. This indicator is really simple, and what it predicts is, if the Fed fate rises YoY by as much as the YoY% change in jobs growth, the economy will fall into recession within roughly a year.
Here is the long term history of this indicator:

It’s been infallible since the 1960s.

Well, the Fed raised rates by 0.25% last week, so let’s zoom in on where we stand now:

The YoY change in the Fed funds rate is +1.0%, while the YoY% change in payrolls, through August, was +1.6%.  No recession is signaled by this model for the next 12 months.

But wait, there’s more! Because the change in the Fed funds rate seems to have a predictable relationship to the YoY% growth in jobs over the next 12-18 months, let’s take a look at that.

 

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